Pegasus, a small extracellular peptide regulating the short-range diffusion of Wingless

Small Open Reading Frames (smORFs) coding for peptides of less than 100 amino-acids are emerging as a fundamental and pervasive gene class, found in the hundreds of thousands in metazoan genomes. Even though some of these genes are annotated, their function, if any, remains unknown. Here we characterize the function of a smORF encoding a short 80 aa peptide, pegasus (peg), which facilitates Wg diffusion during the development of the Drosophila wing imaginal disc. During wing development, Wg has sequential functions, and in the later stages, when peg is strongly expressed, it patterns the presumptive wing margin. A reduction in Wg protein secretion at this stage produces effects ranging from total abolition of the wing margin to partial loss of bristles and reduction of proneural gene expression. Here we show that the Peg peptide enhances the short-range of Wg diffusion in this context, in order to produce a proper wing margin. We show that CRISPR/Cas9-mediated mutations of pegasus generate wing margin phenotypes, and changes in target gene expression, consistent with a role in Wg signalling. We find that Peg is secreted, and that it co-localizes and co-immunoprecipitates with Wg, suggesting that Peg directly binds Wg in order to enhance its signalling, and our data from fixed and in-vivo Wg gradient measurements supports a model in which this enhancement occurs by increasing diffusion of extracellular Wg. Our results unveil a new element in the regulation of the Wg signalling pathway, and shed light on the functional consequences of the miss-regulation of Wg diffusion in this developmental context, while also reminding us of the functional diversity, and relevance of small open reading frame genes.